Columbia University’s renowned economist Jeffrey Sachs talks about the lessons he has learned from consulting with governments around the world, about how global problems, such as the war in Ukraine, will only be solved via efforts to understand the other side, never through force.
Subscribe and Listen on: Apple Podcasts | Spotify | Stitcher | Google Podcasts | YouTube
Welcome to Economics & Beyond. I’m Rob Johnson, president of the Institute for New Economic Thinking. I’m here with Jeffrey Sachs. How would I say? I always smile, when every time we talk, I’m paying homage to the Rommel family, George a nephew of Rommel, where we both grew up in Detroit and our parents were good friends with the respective Rommel’s, and perhaps that inspired my curiosity, even as an undergraduate at MIT, to learn more about Jeffrey Sachs. And it’s been like a north star beacon for me in thinking about what’s important through my entire career.
So, Jeff, thanks for being here. I’ll describe just briefly, you’ve done a tremendous amount of work here at Columbia University. The highest ranking professor, you ran The Earth Institute for many years. Currently the president of the US Sustainable Development Solutions Network. And I would say just as a signature, I see you always have… There’s a gift that I perceive and that I admire and I try to turn people onto about your career. You always seem to choose important questions. People can do all kinds of dances with technique, but how do they say they might be fiddling with [inaudible 00:01:49], and you seem to zoom in over and over on things that matter, not just to your country or not just to prestige, but to humankind. And I greatly admire that.
Thanks for that. Very nice.
Well, I feel it way inside me. And I just want to refer, you’ve written many books. We’ve talked about The Age of Globalization, in one of our previous episodes together, but Sustainable Development, the two I underscored today, because the question is related to the Ukraine that I’ve seen you writing about in Project Syndicate and other places were you recently… To Move the World JFK’s Quest for Peace in 2013 and A New Foreign Policy: Beyond American Exceptionalism. What I see there, first book, 2013, second book, 2018 is a prescience. You’re seeing ahead of the challenges that we’re going to have to address. So I’m very excited today that you’re with me and we can talk about what you see, what scares you and what’s the way up.
Well, thanks so much. It’s great to be with you. And thank you for focusing on those two books. The book about JFK, which I wrote in 2013 was to commemorate an incredible speech and initiative of President Kennedy in 1963, which was just months after the Cuban Missile Crisis. Now, here we are Rob, the 60th anniversary of the Cuban Missile Crisis with another showdown between the United States and Russia. And so I’m going back to that speech, to the Cuban Missile Crisis, to the lessons that I drew in that book just about every day in my thinking about what events are telling us right now. The 2019 book, A New Foreign Policy: Beyond American Exceptionalism, is also directly core to my thinking right now. I do think the United States doesn’t get or accept it’s a realistic constructive place in the world right now.
And that this is at least a part of our problem in a world that is increasingly destabilized. I think that both books focus on one fundamental idea, which is that, peace is better than war and peace comes through a constructive engagement with the other side. President Kennedy said in his remarkable speech, given at American University commencement on June 10th, 1963, that pieces into some magic solution. It’s not an event. Peace is a process, a way of solving problems. It is a constructive engagement with the other side. It is what I’ve learned in 21 years of advising the UN leadership. It is diplomacy at its finest. It’s not guessing what the other side will do. It’s not playing a game theory where you take as given the other parties move, which can have disastrous consequences, but rather you engage. And I think that this has been by central theme, partly from my own life experience of working in cultures all over the world, very different communities, different religions, races, ethnicities, nationalities, geographies.
It taught me something about the common fate of humanity, I think. And it also taught me about the wonders of dialogue, communication and diplomacy. Well, here we are with war, with incredible tensions, with China, with the inability to solve major global problems like the increasing the arrangement of the Earth’s climate system. And I believe that in all of these, what we’re seeing is a failure of state craft, a failure of concepts of cooperation, a really an application of crude ideas that are like the game theoretical ideas that assume the worst of the other side, for example, and assume you know what’s in Putin’s mind assume you know what is in president Xi’s mind. And when we behave that way, we get very bad outcomes. So I thank you for focusing on those works. And for me, they do reflect my underlying feeling that there’s a different way for us to approach global problems, different from what we’re doing right now. And it would be much safer, more prudent and more constructive to follow a different approach.
Well, I find it fascinating, just putting what I’ll call pattern recognition. You’re talking about what John Kennedy did. I remember the old, what I’ll call the Bismarck playbook. I took a bunch of courses in arms control and disarmament, and they said the one of the big dangers is when you’re failing at home, there’s discord, the Bismarck playbook is a metaphor. Find an external enemy so everybody can agree and focus on that. But sitting behind the Bismarck playbook in the first appendix to that playbook, is the need to cooperate on climate change. So we’re not in a place where… Forget mutual assured destruction for a moment, we got to cooperate. There’s another way we can exterminate earth if we don’t collaborate. And then the last thing I’ll throw into this mix is a wonderful book by the scholar Orville Schell and his colleague, John Delury called Wealth and Power.
And what Orville, who was a good friend of mine said, this was years ago. He said, “Rob, we’ve got a situation where the Chinese went through centuries of humiliation, opium war, Japanese invasion, et cetera. America thinks it runs the world and wants everybody to fall in line behind it.” To use the big Brzeziński’s metaphor, we have tectonic plates crashing between two philosophical systems at the head table of the G20, that used to be the G7. We are in a situation where you can’t even play game theory with different philosophical systems, because you’re projecting things onto your counterpart that may never have been in their imagination or in their training.
So you’ve got this instability, what I’ll call the Bismarck playbook, you’ve got the end game of climate and then you have this tension that centers on US, China, but we could bring… Why didn’t Russia, after the deescalation, the end of the Soviet union, and I know you’ve worked a lot there, so I don’t know the answer to this at all, but why didn’t Russia get the equivalent of a aid program to integrate them into the EU, regain prosperity, dignity through that? And I’ll ask you question, is the political economy of the military industrial complex, a little bit of the evil that hides inside this dilemma of danger?
So there’s a lot of intertwined issues there. And let me start with the very specific issue of climate change and the energy transformation that we know we need. We need to move to a zero carbon energy system. And that requires actually a lot of long term thinking and a lot of international cooperation. So every day in the context of the Ukraine war, I’m asked by somebody and it happened again this morning, what’s the implication of the war for climate change? In other words, you see Russia cutting off or threatening to cut off natural gas to Europe or Europe putting on sanctions on oil and gas imports from Russia. Will this accelerate the energy transition? And the answer is basically, no, because it may change the calculus in the very short term, it’s actually opening up more coal mines again or pumping more gas and oil to make up for what has been lost from Russian supplies.
Maybe by raising the price of oil and gas on world markets, it’s making some new solar projects more economical and financial, but all of that misses the main point, which is that the real changes we need are long term strategic changes in the energy system. And that requires a stable, peaceful, cooperative environment. Even renewable energy to be efficient and effective needs to cross borders. It needs to be regional, even globally connected in some ways, maybe in the new hydrogen economy, we can’t do this if we’re in conflict. We won’t do this if we’re in conflict. So this is the first point that almost everything of real value for development and what we now call and should call sustainable development, meaning economic development that is also socially, just and environmentally sustainable, requires a long perspective. If you have a short perspective because of huge uncertainties, because of war, because of conflict, then you can’t accomplish anything real of the transformations that we need.
You can improvise. You can maybe keep your footing in the short term, perhaps, but the truth of the matter is, real development of any kind requires years, even decades of hard, continuous work. Educating children, building infrastructure, cooperating across river sheds, building power transmission grids that are again, transnational. And that is a long term cooperative effort that depends on peace. And we’re not getting there right now, partly because our mindsets really are wrong. And unfortunately, what I have invade against in the US context is the idea which is very popular. It’s in every speech of us leaders, that the world is safe when the United States leads the world. So primacy or what the political scientists call hegemony is really built into the American thinking. I think Henry Luce did an unfortunate thing to America when he, in 1941, christened this as the American century, is a great turn of phrase, by the way. So inspiring.
And so ennobling, but it actually basically went to the heads of the permanent state that they took it literally. This is our century. In the past it was Britain’s century, in the industrial age of the 19th century, or it was the Mongol century, or it was the Roman centuries. Now it’s our century. What a dangerous way to think about things because you get way overstretched, you act provocatively without even attempting to understand the other side. And that unfortunately, is so much of what happened in Europe after the 1990 remarkable transformation. And as you know, I was there. I was physically present in de Kremlin in December 1991. You couldn’t even believe. I could not believe that. And especially you’d appreciated a kid from Detroit sitting in the Kremlin in this huge office and who works in the far door, Boris Yeltsin.
And he walks across the room, and he sat down right in front of me because I was leading the delegation. And he said, gentlemen, because it was all men. He said, “Gentlemen, in the next room is the leaders of the Soviet military. And I have just agreed with them to the disillusion of the Soviet union.” I heard literally those words. Yeah. Wow. Is exactly right. It was weird. No. So I thought… And I had been working in the Soviet Union before that. I was told, I don’t know if it’s true, that I was the first person to brief the ghost plan leadership in its entirety, on the top floor of ghost plan, just outside of Red Square in 1990 to the politburo leader who headed ghost plan on the transformation to a market economy.
And they were taking notes of 50 Soviet leaders on the other side, all with notebooks open, taking copious notes about market economics. But the fact of the matter is Gorbachev and Yeltsin, wanted a common home. Gorbachev, who I regard as the greatest statesman of our age. And who’s reviled in Russia for having lost the Soviet Union and for inflation and everything else, he’s the greatest statesman of our age, because he understood that what we needed was peace rather than a cold or hot wars. And he was ready to even let the system fall rather than shoot people to “save the old system.” But his idea, which I know was a common home from Rotterdam to Vladivostok, that we have a common European home. I believed it. I went to work for his team in 1991, promoting what we called the Grand Bargain working with Graham Allison, who was then head of the Kennedy School at Harvard and Stanley Fisher and others.
And we recommended a significant financial assistance program to the Soviet Union to support its economic and political reforms. What was the White House response? Complete and yet nothing. [inaudible 00:18:18] not anything we’re not doing this. Okay. That was a disaster for… The failure of Western support definitely undermined Gorbachev. Yeltsin emerged after the attempted push against Gorbachev which was in the summer of August 1991. And then I was contacted by Yeltsin’s economic leader, Yegor Gaidar and I came to Moscow, and Yeltsin said to me and said to others, “I wanted normal country. I want a democratic country with the market economy. And I want normal relations with the world.” I said, absolutely wonderful. This is exactly what we want. And Gaidar, who was then the acting premier of Russia, which was about to become the sovereign country, was meeting with the G7 finance deputies in November 1991.
And Russia was running out of foreign exchange reserves. This was a fulminant financial crisis. So I knew a lot about financial crises and their history and their resolution, and worked with Poland a couple of years before. And I suggested to Gaidar, well look, tell the US and the other six deputy finance ministers, you need a stand still on the debt payments because you’re running out of reserves and Russia is about to become an independent country and we can’t have a financial collapse. And he came out of the meeting, just absolutely action faced. He said, they wouldn’t even consider it. They said, you have to pay to the penny. We will not allow anything right now. We’re not authorized to allow anything, we will not allow anything, you continue to pay. Russia ran out of reserves at the beginning of 1992, as Yeltsin came to power.
In other words, a fulminant financial crisis. I couldn’t believe it. I spent two unbelievably frustrating years trying to get the US and the IMF to do something and they wouldn’t do anything. And Larry Eagleburger who was acting secretary of state explained to me at one point said, Mr. Sachs, it’s not even about what you’re advising, even if I agreed with it, it’s not going to happen. And he said, this is an election year, it’s not going to happen. And the truth is, this didn’t determine all the future, but God, did it show an attitude of obtuseness in the United States. And I didn’t appreciate then that Cheney and Wolfowitz were working on their great NeoCon illusions that now were the sole superpower. Now we get to do what we want, and they really were working on the next wars because they were going to take away every Soviet ally or Russian ally in the middle east, knock out Libya, Syria, Iraq.
This was a plan already from the early 1990s, according to Wesley Smith. And I didn’t know it at the time. I just couldn’t believe, here we are this historic moment, a chance to cooperate and no, we’re not going to cooperate. We’re going to be the sole superpower. And I just found that obtuseness year after year from the US, and by the end of the 1990s, I basically had, had it because I had seen the US now from all sides, I had seen it from the Latin American perspective. I had seen it from the central European perspective. I had seen it from the Russian perspective. I had seen it from the Indonesian perspective in 1997. We just were not a cooperative country that aimed to work with other countries to solve problems. We were the unipolar, great power of the world. We were arrogant and we were not paying attention to what other countries said.
And this manifested itself in a number of financial debacles of these countries that had big effects on the world. It also manifested in what brings us to the war in Ukraine today, though, this is a very unpopular view. It’s right. And that is NATO enlargement. What John Mearsheimer has said is right. Kissinger said it. And so many other wise people, George Kennan said it in 1997, don’t do this NATO enlargement, it’ll lead to a new cold war. Now we have a hot war. The secretary of defense under Clinton was deciding whether to resign or not. When he learned that Clinton indeed would go ahead with NATO enlargement because, Bill Perry, who was the secretary of defense said, look, we’re starting to improve relations with Russia. Do we really need to risk that right now by peremptory moves of NATO enlargement, especially since unequivocally, both the Germans and the Americans had promised Gorbachev and then Yeltsin, no enlargement in return for German reunification.
Then we lied about it. Well, it’s not in writing. We brought out all our lawyers, but good historians know that those commitments were made. And we just want to deny that. And given the predominance of US government in our media, you can tell any story you want. This is absolutely true, but the long and the short of it, Rob, is that NATO enlargement started. We weren’t giving any financial help. We were plotting wars against Saddam Hussein, Muammar Gaddafi, Assad, all the allies of the former Soviet Union. And then of Russia. Russia has military naval base in Syria. So Assad would be our target and so forth. No cooperation other than superficial. And in the 1990s, the NATO enlargement started. And then during George W. Bush… Well, actually Clinton did something that in retrospect, we didn’t even see the significance of, but it was hugely significant and misguided.
And that was the war against Serbia in 1999, to force Serbia to give up Kosovo. So there was a rebellion of Kosovar Albanians or Albanian Kosovars, I should say, in Serbia. And the US took sides and said, let them break away. And when Serbia said, no, they’re part of Serbia, which is the normal way that diplomacy works, the US bombed Belgrade for several weeks. And we set up the precedent that if you want a breakaway state or you want to weaken the other side, just go bomb them. And then when Russia says, well, when we do this, we’re called the crime of humanity, but when NATO does it, that passes as defending freedom fighters. So isn’t there no standard or a double standard, but just to carry on to the current day, in the early 2000s after the Belgrade bombing, and then after 9/11, of course, Bush pushed the enlargement of NATO to I think, seven countries under his watch. An extraordinary increase of the number of countries, the Baltic States to begin with the Romania, Bulgaria, Slovakia, Slovenia, if I remember correctly, all during Bush’s watch.
And then to the shock of the Europeans in NATO in 2008, he said, Ukraine and Georgia will become members of NATO. And just take a look at a map. And I encourage everybody to take a look at the map of the Black Sea. What was NATO’s idea? What was the US strategic idea? The US strategic idea was basically to own the black sea for NATO, because you’d have Turkey, Romania, Bulgaria, Ukraine, and where’s Georgia all the way over on the Eastern side of the Black Sea, suddenly is going to be a NATO country, whereas NATO was originally to defend against an invasion by a now defunct non-existent country in Western Europe.
So suddenly, it is an expansionary force moving straight across the Black Sea. It reminds me a lot of the Crimean War of the 19th century. Who controls the Black Sea? And well, one thing has led to another and we have the war in Ukraine. And if in our media you say, the United States played a provocative war. You’re immediately targeted. Oh, you’re just purveying Putin’s propaganda. Well, this is really nonsense. We need a serious discussion, some context, some history, and we should not have pushed NATO right up against Russia’s edge and right around the encirclement of the Black Sea. But we did so, and now we’re also paying consequences for this, but especially Ukraine is paying consequences for this.
Yeah. I remember some of my teachers at MIT in that arms control disarmament. Once, this was years after I was a student, but I ran into Bill Kauffman and I said, this doesn’t feel like game theory to me, it feels like the chain store paradox. Which is, you never should engage in each of these things, but you act like you got to do it to show your tough to the next three episodes, but with consequences being so dangerous, first with regard to nuclear war, and now with regard to climate, this is madness, and this is not leadership. Why are leaders so afraid of our population at this juncture that they have to put on this ritual of toughness, as opposed to doing what needs to be done?
Did you play the game of risk as the board game risk? Okay. So the board game risk really is a marvelous model of how Washington thinking is, you have the map of the world and the aim of the game is to have your piece on every space of the world. And as you move forward, if you’re successful and your armies are advancing into new territory, every new territory you have has borders with the enemy. And suddenly, every new border becomes the conflict zone. Every new border becomes vital for your national security. And so you have to have every space on the board, or suddenly you’re at risk. Now, American strategists behave this way. I think it’s mind boggling because we shouldn’t be playing a game of risk where you’re trying to conquer the world, but this is the American strategist approach.
And a good example of it is the Solomon Islands, tiny islands, 3,200 kilometers off the coast of Australia that had the audacity to sign a security pact with China. And suddenly, the United States and Australia are in a tizzy. How dare they? This is a threat to security. And you hear the voices in the US Congress completely unacceptable that there’s a security pact because you give China one inch, they’ll take the world. But when the United States says, well, NATO should enlarge to Georgia and Ukraine and Russia says, no, that’s a security concern. We laugh. We say, why is it a security concern? We’re peace loving, we’re wonderful. And that’s their choice. That’s not our choice. We didn’t say, well, that’s the Solomon Islands choice. We dispatched the deputy of the national security council to Asia on an urgent mission to express the US displeasure at the Solomon Islands decision to enter this pact with China.
So much, Rob, comes from the unwillingness to really have rules that apply to yourself as well as to others or to think empathetically, what is the other side thinking? And it comes back by the way to the Cuban Missile Crisis. And I think we should talk about that because it’s absolutely relevant. When Khrushchev put the nuclear or the atomic weapons in Cuba, all of Kennedy’s advisors, except one, except Adlai Stevenson, said from the start, you must attack and take them out. We need a military operation. Many things can be said about that. But I think the bottom line is it would’ve started world war III, because the CIA had every fact wrong. It thought that the missiles were not yet operational. It completely underestimated roughly by a factor of seven, how many Soviet troops were actually in Cuba? How many would be killed in a military operation? And so forth.
Kennedy did a remarkable thing. He kept asking one question, what is in Khrushchev’s mind? What is he thinking? In other words, Kennedy behaved empathetically. It didn’t mean he sympathized with Khrushchev he was thinking, what is Khrushchev thinking? What is his point of view? Does he want war? What is he trying to prove? Kennedy had to learn actually the details that there were US missiles in Turkey. What are they? Why are they there? Who put them there? And so on. But by the second week of the crisis, Kennedy realized Khrushchev didn’t want war, but he did want to put America’s face in it because the US had its Turkish missiles. Its missiles in Turkey pointed right on the border of the Soviet Union. The US had invaded Cuba in the Bay of Pigs operation and so forth. Kennedy realized, you know what? We got to get out of this by a compromise. You remove your missiles. We remove our missiles. We commit never to invade Cuba again.
And that’s how the crisis was resolved. It wasn’t, we demand victory because Khrushchev has done the most dastardly deed. So we must defeat that man, which is the rhetoric that we have today. Must defeat Putin with his 1,600 active nuclear warheads. We must defeat Putin. This is mind boggling that even on an anniversary like this 60 years anniversary of the Cuban Missile Crisis, we’re not taking care to learn the real lessons of how you diffuse a crisis. And you start with empathy. You say, if we care about the Solomon Islands, maybe Russia cares about Ukraine and Georgia in the same way. Maybe we shouldn’t be quite so provocative. Maybe we shouldn’t be talking about humiliating, defeat and so forth. Or maybe we shouldn’t be saying, this is the worst crime in modern history when the United States has engaged in so many wars of choice. And maybe we should find a way for both sides to stand down.
Yeah. Well, I see, I remember reading Daniel Ellsberg’s book, The Doomsday Machine, about that there were many nuclear weapons inside of submarines off the coast of Cuba. And we started dropping depth charges on them, but for… I can’t remember the gentleman’s name, who overruled firing the missiles. They were terrified. They were underwater and the death charges were going off trying to essentially killed them all and drown them all.
And absolutely right.
And this guy wouldn’t allow the missiles to be shut, but it’s that close. It’s that close to extermination.
So reading list for everybody listening, Daniel Ellsberg, The Doomsday Machine and Martin Sherwin, Gambling With Armageddon, which is the finest book ever written about the Cuban Missile Crisis. And Martin Sherwin, tells this story that you’re so importantly referring to Rob, and I think it has many lessons, but what happened is even after Kennedy and Khrushchev had agreed on the way out, a disabled Soviet submarine in the Caribbean that was out of radio contact. So it had no news, was disabled, it was overheating. It needed to surface just to breathe. Sailors were fainting and it started to surface and a jackass in the US Air Force, instead of dropping depth charges, dropped live hand grenades on the submarine as a joke. And he’s, we’ll scare the hell out of them. So the commander of the vessel ordered a nuclear tipped submarine to be put into the… Nuclear tip torpedo to be put into the Torpedo Bay.
And called for its launch. And it happened by coincidence that a Soviet party official, a communist party official, was on that vessel named Antipoff. And he had the ability to override the order of the skipper of the submarine. And he said, no, we’re going to surface. We’re not going to fire this. And under US military doctrine, described by Ellsburg and by Sherwin, if the US was attacked by a nuclear weapon, even a nuclear tipped submarine, our military doctrine said we would unleash the full scale response of a complete attack on the Soviet Union, China and all of the other countries of the Soviet system.
And the estimate was 700 million dead. But what they didn’t know was about nuclear winter, because the such an impact could have ended human life on the planet. We came within seconds of this. We’re stupid. If we think that things can’t get out of hand. Today, I read about a US general saying, well, we may need to break the Soviet blockade of the port of Odessa to let Ukrainian grain supplies. I’m sick of these generals telling us about things that are so unbelievably risky without a proper public debate and understanding because we could end up in nuclear war. And this is mind-boggling that we are having general opine on these kinds of military operations, which would be tantamount to direct US war with Russia in this kind of way.
And you’re talking about the extermination of life on earth. These are not rumors. I’ve seen in nature and science magazine studies of what happens to the upper atmosphere, if there’s a nuclear exchange. And I encourage many people now, I’ve been doing a little bit of work with a group called the Quincy Institute, Andrew Bacevich and hard tongue in this group and exploring some of the ramifications for how our military decisions are being made. And it’s really quite haunting to try to understand this dynamic as having anything to do with representing the wellbeing of America or mankind.
I learned in thinking about American history and politics, which I’ve been doing pretty much nonstop for 50 years now, it turns out the president’s main job in the world is to keep a foot on the brake of the US military machine, because it’s like those old cars that are poorly tuned, that though they’re a neutral, they’re always revving forward and they’re always jumping. You take your foot off the brake, the car jumps forward and good presidents, great presidents have been the ones to have the foot on the brake. Like Kennedy, had the foot on the brake in October 1962. Johnson, did not have the foot on the brake and we escalated in Vietnam. We know that Bush, I don’t even know if he was in the driver’s seat, much less having a foot on the brake, but we went to so many wars. Obama, was no good at this either. So this is a real question…
It’s a systemic process. Yeah.
It is like the game risk. You’re always looking, oh, we’re in Romanian and Bulgaria, we’re at risk unless we’re also in Ukraine. So we better expand. Well, then there could be losses in the Eastern Black Sea and the Caucasus. So we better expand to Georgia, et cetera. Or the Solomon Islands or what we’re doing in East Asia and just so much chit chat about war with Taiwan and US war with China and Biden piping off and so forth. All of it is provocative. All of it requires actually, our good luck that a president says, no, we’re not going farther. Korean war again, had MacArthur had his way, he would’ve invaded China. We would’ve used nuclear weapons at the time, Truman, his right decision, no, stop. He had to fire his top general. This is really the job of the American president because the underlying revving machine doesn’t have a natural stopping point.
I remember, the late Chalmers Johnson was a good friend of mine, and I was doing a lot of work in Japan at the time, but he was working on the books like Blowback. He wrote that trilogy about the dangers that foreshadowed the attack of 9/11. Saying if you’re aggressive, you are going to have these consequences putting the American people at risk. But let me shift Jeff, as we’re coming down the home stretch to the relation of all of this to budget and the wellbeing of America.
What concerns me is at the level of medical care, the OECD data shows that America per capita spends more than twice the average in the OECD to have some healthcare system that is ranked 38th in the world by the WHO. The second dimension is, we have a baby boom creating a demographic bulge where elder care is going to be a priority. We are going through technological transformation that requires transforming the education system towards knowledge intensive things. What was his name, Sir Ken Robinson, the most famous TED talker of all time, how schools kill creativity. We got to change that. That involves investment. Now, we’ve got this military urge and climate transformation.
I guess I worked on the Senate Budget Committee under Pete Domenici, and I’m thinking, how are we going to get all this stuff done if we keep playing these aggressive military games? And how are we going to harness the political economy? I always laughed, Domenici said to me one time, well, you’re an economist, you know that thing called Say’s law? I said, yeah. He said, how supply creates its own demand? I said, yes, Senator. He says, well, you watch every year when we put up the budget about the time that the military budgets come up, you’re going to see all kinds of news about how dangerous the world is.
They’re using fear to create their own demand. And Adam Curtis, the BBC documentary, he created a series, a three part series that you can watch for free on thoughtmaybe.com. And it’s called The Power of Nightmares. And so Jeff, I’m loading you all up, but you can’t sit there and be… How would I say, self righteous budget hawk, tolerate a military industrial complex and spending 22 times what any other country is. Neglecting older people, neglecting young people and letting our healthcare system cost twice what it should. And with all the discord of not reconciling those things, the Bismarck playbook comes back into center stage.
Well, one of the expressions of Joe Biden that I really like though, I haven’t heard it from him recently, for an obvious reason. He said, don’t talk to me about your values. Show me your budget. And I’ll tell you your values. And what he means by that is where you put your money, that’s what counts in the system. And the United States has really messed up the budget. It spends far too little on many areas like education, like wellbeing of children, it spends far too much on other areas like the so-called modernization of our nuclear fleet arsenal, when we should be negotiating long term nuclear disarmament. And in general, our budget is a mess. As you say, also, the way we organize key parts of the economy like healthcare, is to give private monopolies to a crucial sector, ending up overpaying roughly by a factor two for our healthcare, we spent almost 20% of GDP on healthcare compared to roughly 10% of GDP in our pure countries.
So I’ve written a number of books, The Price of Civilization being one of my favorites, about what a budget would look like for a civilized country and interestingly, and one of the better parts of a speech that secretary of state Antony Blinken just gave about US approaches to China. He said, the real approach is we need to invest in ourselves. We need to strengthen our capacities in science, education, our wellbeing at home, because that’s what makes us the competitive model vis-a-vis, the rest of the world, including vis-a-vis, China. And that’s true, but we’re not doing it. And we have lost the budget debate and the budget narrative in the last two years. Biden came in with the idea of a package to build back better. It did not appear. What happens in the United States is essentially, key sectors are in the hands of powerful lobbies and Military Industrial Complex is one of them. Big Oil is another or Fossil Fuel Industry is another.
The healthcare sector is a third. Those are favored by the budget. They are favored by regulation and areas that don’t have such powerful lobbies. Don’t see the light of day. And in general, the United States under taxes even though we’re told all the time that were being crushed by taxes, the total government revenues in the United States for federal state and local are about 30% of GDP of national income, but in Northern Europe, which ranks much better in healthcare and longevity in many quality of life indicators, about 45% of GDP. So the fact of the matter is the budget’s a mess and what founded for Biden in the end, why didn’t his package go through because nobody wanted to pay for it with taxation. And it all unraveled when Senator Sinema said, I don’t want to have a rise of the corporate tax rate.
And Manchin said, I don’t like that billionaire tax. And we ended up with nothing. Biden, ended up empty handed, ineffective politics, by the way. So I think a president ought to be able to keep a couple senators in the fold and he failed to do so. And that’s part of his job also is to know how to twist arms or cajole or give whatever side payments for new projects in West Virginia, you get something done, you make a deal, but he could not make a deal. He failed on that. So we have nothing. So we have a budget mess.
And by the way, a budget mess also with a mountain of debt, now 100% of GDP, of public debt, that’s actually consequential with interest rates going up, the burden of that debt is also going to be quite significant. We need to raise some taxes and we need to restructure what we spend, but we’re a blocked political system. So we are not showing a way forward on this and I, not holding my breath. Nothing’s going to happen. Probably, the Democrats are going to lose one or both houses of Congress in the fall. If that happens, I would guess there would be no significant budgetary reform or action until 2025.
Yeah. Well, Jeff, I mentioned at the outset that you and I grew up in Detroit, and I remember one of my father’s friends said to me, Detroit is the place that America divorced because they wanted to believe in the American dream. And when we had our stresses in the 60s and 70s, things like Tom Sugrue book, The Origins of the Urban Crisis in Detroit, he said, they’d had the voting rights act and the civil rights act and all the Democrats in the south were afraid to vote, to support the transformation of a black majority, black government, meaning Coleman Young as mayor.
So we got divorced from… We were no longer America. We were a bad example and you and I have done work together in Detroit and been at numerous meetings. And I often think of the pressures that I remember in 1990, there was this headline in CNN, Detroit is the shadow that looms over the future of America. In other words, it’s an indicator, it’s an early warning, like the Canary in the coal mine of toxic political economy. And so when I thought about talking with you today, I often go back to my musical origins. There was a guy that actually played my senior prom named Bob Seger.
Oh, my God. Hold on.
I followed you for many years as a younger person from Detroit, but with family, mutual friends who were guiding me to look at your example, Bob Seger wrote a song that made me think of you. It’s called Travelin’ Man, and at the end of the song, as he’s reflected on all of this, he says, sometimes at night, I see their faces, I feel the traces they’ve left on my soul. Those are the memories that make me a wealthy soul. Jeff, you give me that kind of inspiration, curiosity. I follow your work. I have, since I was, I guess, a senior in high school. And I think it’s amazing how you, after what might call the woundedness of Detroit, all the things you’ve described today in all your international involvement, remains so constructive. And I’m very grateful for that. Thank you.
Well, Rob, I’m grateful that we do it together and thank you for those lovely words, but we’ve been on a journey together. And your leadership of INET and constructive new approaches to these issues is essential. So I really thank you and how great to be together with you today.
Yeah. Thank you. And well, how would I say, pause now and wait for the next turn of events in the next chapter, but I look forward to working with you in the days ahead. And once again, I’m very grateful for the example you set for our young scholars and for our country.
Thank you so much.
Bye. And check out more from the Institute for New Economic Thinking, at ineteconomics.org.